Seadrill (SDRL) Stock Declines as Oil Prices Slide

Seadrill (SDRL) stock is decreasing after a rise in OPEC crude oil production caused oil prices to drop.
By Amanda Gomez ,

NEW YORK (TheStreet) -- Seadrill (SDRL) - Get Report stock is falling 1.19% to $6.10 on heavy trading volume on Monday afternoon following a hike in OPEC crude oil production that caused oil prices to decline.

WTI crude is down 0.17% to $41.64 per barrel, while Brent crude is decreasing 0.62% to $44.58 per barrel this afternoon, according to the CNBC.com index.

OPEC output increased to 31.77 million barrels per day in November, compared with 31.64 million barrels per day in October, according to a Reuters survey.

The boost shows OPEC is pumping near record highs to continue its policy of defending its market share.

The 12-country organization will meet this week to review its policy, but a drop in production is not expected, Reuters added.

"I am seeing that Saudi Arabia will not change its position," an OPEC delegate told Reuters. "No favorable outcome will be reached at the next meeting."

So far today, 12.57 million shares of Seadrill, an offshore drilling contractor, have been traded, compared with its average daily volume of 11.21 million shares.

Separately, TheStreet Ratings team rates SEADRILL LTD as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

We rate SEADRILL LTD (SDRL) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Energy Equipment & Services industry. The net income has significantly decreased by 1327.5% when compared to the same quarter one year ago, falling from $149.00 million to -$1,829.00 million.
  • The debt-to-equity ratio of 1.23 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, SDRL maintains a poor quick ratio of 0.77, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Energy Equipment & Services industry and the overall market, SEADRILL LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 69.25%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 1293.54% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • SEADRILL LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, SEADRILL LTD increased its bottom line by earning $8.10 versus $5.47 in the prior year. For the next year, the market is expecting a contraction of 71.3% in earnings ($2.32 versus $8.10).
  • You can view the full analysis from the report here: SDRL

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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